April 26 (Bloomberg) -- Credit Suisse Group AG Chief
Executive Officer Brady Dougan said the bank’s recent cost-cutting and reorganization will allow it to achieve its target
of 15 percent return on equity over the business cycle.

“We have seen a strong start to the year, and we’re
confident that our cost and capital-efficient business model
will continue to deliver strong and consistent revenues across
our businesses,” Dougan said in a prepared speech for a
shareholder meeting in Zurich today. “We believe we are well-positioned to effectively serve our clients, to further drive
market share gains and to deliver superior returns to our
shareholders.”

Credit Suisse posted a jump in first-quarter profit this
week on lower costs and improved earnings at the investment
bank. Return on equity in the first quarter, which is
traditionally the strongest of the year, was 14 percent.
Chairman Urs Rohner reiterated in his speech to shareholders the
firm’s commitment to the investment bank and fixed-income
business in particular, saying Credit Suisse will be able to
deliver “attractive returns” while withdrawing from businesses
that can’t cover their cost of capital.

“We are not yet satisfied,” he said. “We want to deliver
further improvements.”

Credit Suisse gained 26 percent in Zurich trading over the
past six months. The increase compared with an 11 percent
advance for the Bloomberg Europe Banks and Financial Services
Index, which tracks 40 companies.

Pay Initiative

Implementation of the so-called Minder initiative on pay
will make company law in Switzerland “very rigid” in terms of
corporate governance issues, Rohner said. In a referendum last
month, Swiss voters approved a proposal giving shareholders a
binding vote each year on executive pay as part of an initiative
that also bans big payouts for new hires and departing
executives.

Some shareholder groups have been recommending investors
oppose the bank’s compensation report in today’s consultative
vote. The report was approved with 88 percent of votes after 68
percent voted in favor last year. Investors in Julius Baer Group
Ltd. rejected the company’s pay report in a non-binding vote
earlier this month.

‘Excessive’ Bonuses

Credit Suisse said in March that it changed the
compensation structure for executives after feedback from
shareholders. Executive bonuses for 2012 were made up of short-term awards, which included unrestricted cash and shares vesting
over the coming three years, and a long-term deferred cash award
vesting in the third, fourth and fifth years. The bank also
published target and cap bonus levels for the CEO and executive
board members, expressed as multiples of base salary, and said
they can be cut to zero should goals not be met.

“Credit Suisse is now one of the first banks to introduce
such a cap,” Ethos Foundation, which advises more than 60 Swiss
pension funds, said in a statement last week.

While commending Credit Suisse for the cap, it advised
investors to reject the pay report.

“It is now possible to calculate the maximum potential
remuneration of the executive management,” the foundation said.
“For 2013, the maximum variable remuneration of Brady Dougan,
the CEO, will be capped at 6 times his base salary, which Ethos
still considers as excessive.”

Credit Suisse raised Dougan’s total compensation by 34
percent for 2012, a year when net income declined. The pay
included a fixed salary of 2.5 million francs, 3 million francs
in short-term and 2 million francs in long-term variable
compensation.

Shareholder Returns

Dougan has said that while pay for bankers is still
outpacing shareholder returns, the dynamic will change once
Credit Suisse completes an overhaul of its business model.

“There does need to be fair sharing between shareholders
and employees in terms of the rewards that come from the
business,” Dougan said in a Bloomberg Television interview
after first-quarter earnings were published on April 24. “We’re
going to continue to do everything we can to make sure that
we’re aligning our employees, and particularly our management,
with our shareholders and really make sure we have a
compensation system that works to maximize our shareholders’
return.”

The bank proposed to pay 10 centimes in cash and 65
centimes in shares as its dividend for 2012 after letting
shareholders choose the previous year whether they wanted 75
centimes a share in cash or in stock to help the company build
up capital ratios. If shareholders approve the dividend at
today’s meeting, they will receive one new share for every 41
shares they hold.

ISS Recommendation

While proxy adviser Institutional Shareholder Services Inc.
recommended investors approve the compensation report, it
advised voting against a proposal to increase conditional
capital to be able to deliver stock to employees. Last year,
staff agreed to convert future payments from a previous bonus
plan into Credit Suisse shares to help the bank raise capital.
ISS and other groups including Ethos cited shareholder dilution
as the reason for their views.

Rohner, replying to ISS’s recommendation in a letter to
shareholders, said that the measure should be viewed as part of
a plan to boost capital rather than compensate employees. The
bank also has said that it plans to restart buying shares in the
market to meet delivery obligations under stock awards after its
capital ratio exceeds the target.

Shareholders approved the increase in conditional capital
with 75 percent of votes, while 24 percent voted against the
motion.